Special report: US Jobs Report about Earnings
Today’s report: USD Down, Stocks Up Into Friday Risk
The latest run of US Dollar gains has been aggressively sold into the final day of trade for the week, which also happens to be a Friday on the first day of the new month. This means we get that always anticipated US jobs report before we close things out.
Wake-up call
Chart talk: Major markets technical overview video
- Increased concern
- manufacturing PMIs
- USD bearishness
- SNB
- Treasury Secretary
- Canada growth
- soft data
- Hourly earnings
- Metal demand
- USDSGD
Peformance chart: Five day performance v. US dollar
Suggested reading
- Bitcoin Bubble Reaches Stock Market, S. Williams, The Motley Fool (August 31, 2017)
- EM Currencies: Comeback Kids, K. Martin,  Financial Times (August 31, 2017)
Chart talk: Technical & fundamental highlights
Choose pair:
EURUSD – technical overview
The market has finally entered a period of correction after racing to a fresh +2.5 year high shy of 1.2100. Medium term studies have been tracking in overbought territory, warning of the need for a period of weakness and scope exists for additional setbacks over the coming sessions. Still, while above 1.1663, the uptrend remains firmly intact, with the market looking to put in a higher low above the level ahead of a bullish continuation. Only back below 1.1663 would trigger a more significant bearish shift.
EURUSD – fundamental overview
There is talk of growing concern over the Euro’s recent run of gains, with many out there wondering if it will have any impact on how aggressive the ECB will be towards policy reversal and tapering when it meets next week. The Euro has come under a decent amount of pressure since topping out earlier in the week ahead of 1.2100 and it looks like where we close out the week will have a lot to do with today’s US jobs report. The risks are still tilted in the Euro’s favour heading into the risk and it would take an above forecast hourly earnings print to inspire more profit taking on Euro longs. Other data out today includes Eurozone and German manufacturing PMIs, US ISM manufacturing, and Michigan confidence.
GBPUSD – technical overview
The major pair has been very well supported back down into previous resistance at 1.2775. From here, look for the market to continue to be well supported, with any additional weakness limited to the 1.2600s in favour of an eventual push back up to fresh 2017 highs and towards the next key objective in the 1.3500-1.4000 area further up. Still, there is risk for an extended period of choppy consolidation before the bullish continuation plays out, which means rallies could be well capped below 1.3100.
GBPUSD – fundamental overview
Renewed US Dollar selling into Friday has helped to prop the Pound off weekly lows and the focus will now shift to the results from today’s anticipated US employment report. There is some room for volatility ahead of the US data, with UK manufacturing PMIs getting digested. Overall, it seems the Pound is being supported on broad based US Dollar weakness in 2017, but at the same time, continues to be well offered into rallies, with the Brexit overhang still a major point of stress. Other data out on Friday includes US ISM manufacturing and Michigan confidence.
USDJPY – technical overview
The market has done a fabulous job adhering to a range trade this year, with rallies well capped above 114.00 and dips supported down into the 108.00s. The latest round of setbacks have been exceptionally well supported ahead of the 2017 low range bottom at 108.13 and this could open the door for a resumption of the range trade, for that next big push back towards the 114.00 area. Still, while the market holds below 111.00 on a daily close basis, the pressure remains on the downside.
USDJPY – fundamental overview
A sizable rally in the major pair has stalled out into Friday, with the market unable to clear stops above 111.00. Thursday’s price action saw the US Dollar back under pressure and a concurrent resurgence in risk appetite. Though these flows are usually offsetting, it was the bearish US Dollar sentiment that won out, opening this latest retreat. Looking ahead, the big event of the day is the US jobs report. It will be important to pay attention to the hourly earnings component in the data. Other releases out on the day include US ISM manufacturing and Michigan confidence. Of course, the direction in US equities will also have a major impact on this market.
EURCHF – technical overview
The market recently pushed up to a fresh 2017 and multi-month high through massive resistance in the form of the 2016 peak at 1.1200, taking the rate above 1.1500 and to its highest level since the collapse of January 2015. However, daily studies are unwinding from extended readings, warning of an additional consolidation in the sessions ahead, possibly back into previous resistance turned support around 1.1200, before the market considers a higher low and resumption of gains through 1.1539 and towards 1.2000.
EURCHF – fundamental overview
The sell-off in the Franc in recent weeks has been a welcome development for the SNB, with the central bank committed to weakening its overvalued currency. In early August, the EURCHF rate traded to its highest level since the great collapse of January 2015. However, the SNB may have also been taking extra measures to weaken the Franc in anticipation of a tougher battle ahead. An intensified capitulation in US equities is likely to rattle global sentiment and invite a wave of unwanted Swiss Franc demand on the safe haven flow. And so, building a cushion in anticipation of this risk may have been a part of the central bank’s strategy.
AUDUSD – technical overview
Daily studies have been in the process of turning down after the market recently surged through the critical 0.8000 barrier to a fresh +2 year high. From here, there is risk for a deeper drop back towards a previous resistance turned support zone in the 0.7500 area. Rallies are now viewed as corrective, with a lower top sought out ahead of the next downside extension towards 0.7500. A break below 0.7800 will strengthen this outlook. Only a daily close back above 0.8000 would force a rethink.
AUDUSD – fundamental overview
Aussie PMI readings have come in mixed on Friday and haven’t really factored into the price action. But the Australian Dollar has been doing a great job holding up on dips, getting help from this latest wave of renewed US Dollar selling. While there was some softness in Thursday’s US data, it seems a lot of the USD selling came from comments from the Treasury Secretary that a little more US Dollar weakness would be helpful to the economy. Surging base metals prices have also not gone unnoticed, offering yet another prop to the Australian Dollar. Looking ahead, the US jobs report will be the major focus, though we also get ISM manufacturing and Michigan confidence.
USDCAD – technical overview
Stretched medium-term technical studies are still warning of the possibility for a more significant bullish reversal to allow for these studies to unwind. A recent break above 1.2500 strengthens this outlook, setting up the possibility for a double bottom formation, with the neckline sitting at 1.2780. A break above 1.2780 would trigger the bottoming pattern and open the door for a measured move extension projecting upside well into the 1.3100s. A close below 1.2400 negates.
USDCAD – fundamental overview
The Canadian Dollar came roaring back on Thursday, with the currency getting a big boost from the combination of a wave of renewed US Dollar selling, above forecast Canada GDP and comments from the US Treasury Secretary. In the aftermath of the GDP data, odds for another Bank of Canada rate hike this year ramped up to 90%, which initially fueled Canadian Dollar gains before the currency extended some more on Mnuchin. The Treasury Secretary welcomes US Dollar weakness and also offered words of optimism relating to NAFTA. Looking ahead, the key focus will be on the US jobs report, though we also get US ISM manufacturing and Michigan confidence.
NZDUSD – technical overview
Daily studies have turned down after the market pushed up to a plus two year high through 0.7500 in late July. A recent break below 0.7200 has opened the door for a more meaningful reversal, that could be setting the stage for a drop all the way back down towards the 2017 low in the 0.6800s. From here, look for any rallies to be well capped below 0.7300 on a daily close basis in favour of the next downside extension towards the psychological barrier at 0.7000.
NZDUSD – fundamental overview
The New Zealand Dollar saw a major reversal of fortune in August, backing well off the late July plus two year high above that major psychological barrier at 0.7500. Last week’s news of the New Zealand government cut of growth forecasts and budget surpluses intensified declines. Meanwhile, economic data out of New Zealand has already been less impressive, as highlighted by recent GDP, CPI and employment readings, which is forcing the RBNZ to reconsider what had been a more hawkish stance. On Thursday and Friday we saw some more soft data, this time in the form of weak business confidence, cooling house prices and a terms of trade miss. There has been some demand out from the weekly low, though this has come from broad US Dollar selling after a not so great Thursday US data showing and soft US Dollar talk from Treasury Secretary Mnuchin. Looking ahead, we get the always anticipated US jobs report, followed by US ISM manufacturing and Michigan confidence.
US SPX 500 – technical overview
After extending the record run in early August, the market has finally relented, acknowledging the need for a period of corrective decline to allow for highly extended longer-term studies to unwind. Still, while the market holds above 2400 on a weekly close basis, the uptrend remains firmly intact. A weekly close below 2400 would be required to signal the possibility for a more meaningful top and bearish structural shift.
US SPX 500 – fundamental overview
The US equity market continues to be well supported on dips. But at the same time, there is a growing sense investors could be getting ready for a more significant reversal, with the record run so extended and prices deviating from fundamentals. Moreover, the fact that Fed monetary policy is normalising could be resonating a little more, with Fed balance sheet reduction coming into play as soon as next month and another rate hike still on the cards this year. Certainly the improvement in the economic data is something that will force the Fed to lean more hawkish, especially if this is accompanied by any signs of a pickup on the inflation front. With that said, the focus will be on the hourly earnings component in today’s US jobs report. If this data comes in above forecast, it could inspire another round of weakness. If on the other hand hourly earnings come in flat or soft, we could see fresh record highs.
GOLD (SPOT) – technical overview
Setbacks have been well supported, with the latest push to a fresh 2017 high just over 1300 setting the stage for a bullish continuation towards the 2016 peak at 1375 further up. A higher low is now in place around 1265 and only back below this level would offset this latest wave of bullish momentum.
GOLD (SPOT) – fundamental overview
Solid demand from medium and longer-term players continues to emerge on dips, with these players more concerned about exhausted monetary policy, extended global equities, political uncertainty, systemic risk and geopolitical threats. All of this should continue to keep the commodity well supported, with many market participants also fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax. Certainly the US Dollar under pressure in 2017 has added to the metal’s bid tone as well, but there is a growing sense that even in a scenario where the US Dollar is bid for an extended period, GOLD will hold up on risk off macro implications.
Feature – technical overview
USDSGDÂ has been under pressure in 2017, with the market recently dropping down to a fresh yearly low at 1.3507. However, stretched studies are warning of the possibility for a meaningful bullish reversal to allow for these studies to unwind. Setbacks have also stalled out around an important 78.6% fib retracement off the 2016 to 2017 low to high move. Look for a break back above 1.3700 to encourage the recovery outlook, while only a close below 1.3500 negates.
Feature – fundamental overview
The Singapore Dollar has enjoyed a nice recovery in 2017. US Dollar selling has been a major supporter of the currency’s strength and we have seen some more of this on the back of White House instability, soft US Dollar policy talk, worry over the US debt ceiling negotiations outcome and Hurricane Harvey. But going forward, the Singapore Dollar’s run may be limited. US economic data is moving back in the right direction which could speed up the Fed’s monetary policy reversal process and fuel renewed USDSGD demand as yield differentials widen in favor of the Buck. We are already seeing signs of this as the market bounces from this week’s yearly low that was unable to break back below a major psychological barrier at 1.3500. Dealers now report buy stops above 1.3700.